Six years ago, Novia’s business was clearly established on the premise that the market for advice had a glowing future.
With the implementation of the RDR in January 2013 bringing in a new era of transparency and ever evolving and improving technology, many argue that the future of personal financial services lies with customers self-serving.
But, for myself, I just don’t see it. We often get asked if we are looking to launch a D2C platform and the answer is definitely not, for many reasons.
The most important factor is the market place and although it is difficult to tell I cannot see any real evidence that there has been a shift from advised to direct.
Obviously Hargreaves Lansdown has enjoyed enormous success in recent years and it is held up as an example of what can be achieved, but the same cannot be said of any of its competitors.
When I think back, say 15 to 20 years, there were a number of fund management groups that had a thriving direct offering and most of that has dwindled away as the market demanded choice.
IMA statistics are hard to interpret as the rise of platforms has made it difficult to see whether sales are advised, but I suspect the proportion of advised sales is as high as ever.
An interesting recent paper by Adam Jones of Altus is certainly worth a read and it would seem that most platform chief executives share at least some of my scepticism.
When asked ‘How big will the B2C/ B2B2C market get in the next 10 years?’, 81 per cent responded ‘Hmm, it’ll grow considerably but not as much as most folk think’ while 9 per cent responded ‘Woof, it’ll go bananas. It’s going to be huge’.
I think these people are more ‘barking’ than ‘woofing’ and I fear for their shareholders; the cost of establishing a direct to consumer brand is enormous and without an existing substantial client base I would be extremely wary.
There have been some clever D2C platforms launched in the past couple of years but from what I hear the shareholders have spent as much as they have achieved in assets under administration.
The problem with financial services is that they are intangible and consumer needs can be very complex.
A very wise and experienced ex-colleague of mine that I spoke to recently didn’t have a clue about Lifetime Allowance Protection, even though he is nearing retirement and I really think that a lot of people who think they know how to plan for themselves have probably messed up their planning.
Financial planning involves a lot more than just picking a fund based on a well-known name and past performance. Why are there so many UK equity funds and why are there more funds than stocks, when in reality a tracker outperforms most of them?
A very famous comedienne was asked about the topic of her financial planning in the financial section of one of last weekend’s quality newspapers and effectively said that she left such things to the experts (an IFA) as from past experience she always screwed things up. I am sure a lot of people think like her.
Technology undoubtedly has given instant access to an enormous amount of information but I would contend that this has served mainly to confuse where financial services are concerned and that there is a very bright future for good quality financial advice – we are not about to change our business model any time soon.
Bill Vasilieff is chief executive at Novia Financial
